Woman admits she helped sell bogus chips for military gear

A Florida woman has admitted she helped sell millions of dollars worth of counterfeit computer chips for use by the US military.

Stephanie A. McCloskey, 38, of Clearwater, Florida, pleaded guilty in federal court to one count of conspiracy for her role in the scheme, which netted $15.9 million over three years. The chips, which came from China and Hong Kong, bore counterfeit marks falsely claiming they were industrial-grade and military-grade goods made by companies such as Texas Instruments, according to court documents. VisionTech Components, the Clearwater company she worked for, claimed 95 percent of its chips were made in Europe.

US military officials have long been concerned about counterfeit hardware from China because its quality is often not good enough to be used in mission-critical systems. Worse still, officials worry that the knockoffs could have backdoors built into them that would allow spies to steal sensitive data or sabotage military gear. Marks stamped on the chips are intended to certify that they are certified for use in military systems.

VisionTech employees took special steps to cover their tracks. On a few occasions, its owner, Shannon L. Wren, “would run his fingernail through the number sequence on the box's label, thereby obliterating the number code, making it impossible for the recipient/buyer to discern if the code on the label matched the numbers on the devices contained in the box,” according to documents filed in US District Court in Washington DC.

Other times, when the counterfeit chips arrived in dirty condition, Wren “directed employees to use large erasers to remove debris and discoloration from the leads of the devices and essentially polish the leads on the integrated circuits making them appear to be in good condition.”

When the company received complaints about the quality of the chips, the preferred response was to offer the customer replacements. Even so, the company was forced to issue $1 million in refunds over three years.

McCloskey faces a maximum sentence of five years in prison and a fine of $250,000, although sentencing guidelines call for a fine that tops out at $125,000. She has also agreed to return $166,141 she received in salary. A sentencing hearing has not yet been scheduled. ®